Safeco Insurance Company Of Illinois v. Midwest Family Mutual Insurance Company

• Court: District Court, D. Nevada
• Decided: March 22, 2024
• Docket: 2:22-cv-01133
• Status: Unknown

Opinion

3 UNITED STATES DISTRICT COURT

4 DISTRICT OF NEVADA

5 * * *

6 SAFECO INSURANCE COMPANY OF Case No. 2:22-cv-01133-ART-EJY ILLINOIS, 7 ORDER Plaintiff, 8 v.

9 MIDWEST FAMILY MUTUAL INSURANCE CO., AND DOES I-X, 10 INCLUSIVE; AND ROE CORPORATIONS I-X, INCLUSIVE 11 Defendants. 12 13 Plaintiff Safeco Insurance Company of Illinois (Safeco) brings this lawsuit 14 against Defendant Midwest Family Mutual Insurance Company (MFMI) seeking 15 equitable indemnity and/or subrogation for a payment of UIM 16 (uninsured/underinsured motorist coverage) benefits to its insured, James 17 Barton (Barton), that it claims MFMI was obligated to pay per the terms of the 18 insurance policies. Before the Court are Defendant’s Motion for Summary 19 Judgment (ECF No. 9) and Plaintiff’s Motion for Summary Judgment (ECF No. 20 14). 21 I. BACKGROUND 22 This case concerns whether Safeco is entitled to recover its payment of UIM 23 benefits from MFMI. 24 On March 7, 2019, Barton was involved in an automobile accident while 25 operating a truck owned by TPM Services, LLC. (ECF No. 15 at 159-160.) Barton 26 allegedly suffered medical damages and bills in excess of $420,000 and would 27 require ongoing and future medical treatment in excess of $1,100,000. (ECF No. 28 1 at ¶ 11-12.) Safeco insured Barton with a policy providing UIM coverage up to 2 to $ 1 million in UIM coverage. (ECF No. 9 at 28.) Barton initially sought recovery 3 from MFMI. After MFMI delayed payment, Barton eventually sought recovery from 4 Safeco, which promptly paid him $250,000 (the policy limit) while reserving its 5 rights against MFMI, which eventually paid Barton $750,000. (ECF Nos. 1 at 4- 6 5; 9 at 78.) Safeco alleges that it had no duty to make the payment and seeks to 7 recover the $250,000 that it paid Barton. 8 Beginning in April 2019, Barton sought to recover his UIM benefits from 9 MFMI. On April 23, 2019, Barton first requested MFMI pay him his UIM benefits. 10 (ECF No. 15 at 62.) On May 15, 2019, MFMI acknowledged its $1 million UIM 11 policy limit and requested injury and treatment information. (Id. at 143.) On 12 September 18, 2019, Barton informed MFMI that he was receiving continuing 13 treatment due to the severity of his injuries and advised MFMI that he believed 14 MFMI should set aside $750,000 to address his UIM claim. (Id. at 145.) On 15 September 26, 2019, Barton provided MFMI with his medical records and a 16 medical bill for $35,255. (Id. at 147-150.) On October 9, 2019, MFMI paid Barton 17 $2,651.05 in med pay benefits and did not mention UIM benefits. (Id. at 152.) On 18 May 5, 2020, MFMI requested a status update on Barton’s treatment, and Barton 19 informed MFMI that he was still receiving treatment. (Id. at 154.) On December 20 2, 2020, Barton requested a copy of his full policy. (Id. at 157.) On January 18, 21 2021, Barton sent a UIM benefit policy limit demand with an explanation of his 22 expenses and requested MFMI respond by February 18, 2021, to confirm it would 23 provide Barton with its full UIM policy limit of $1 million. (Id. at 76-82.) In this 24 demand letter, Barton explained that his past medical expenses totaled 25 $378,372.11 and his future medical expenses were projected to total 26 $1,126,476.00. (Id. at 77.) On February 3, 2021, MFMI responded that it needed 27 his medical records from the past three years “[d]ue to the severity of his injuries 28 and injuries sustained in his 2001 accident[.]” (Id. at 162.) Barton replied on 2 information per NRS 686A.310(1). (Id. at 164.) While MFMI never responded, on 3 February 16, 2021, Barton provided the requested medical records. (Id. at 167.) 4 On February 24, 2021, Barton informed MFMI that he was currently hospitalized 5 for complications from surgery he had as a result of the accident and reiterated 6 that he “hope[d] to have the policy limits tendered in the near future.” (Id. at 172.) 7 Two full years after his initial request, MFMI was still evaluating Barton’s 8 claim. On March 22, 2021, MFMI explained that “[t]he prior records submitted 9 are not sufficient enough to fully evaluate current injuries vs exacerbated injuries 10 vs prior injuries.” (Id. at 175.) MFMI requested all of Barton’s prior medical 11 records related to or since his 2001 accident. (Id.) On March 24, 2021, Barton 12 again demanded MFMI tender its policy limit by April 15, 2021, or provide the 13 actual evaluation at that time so he could determine whether he needed to file a 14 lawsuit for breach of contract and bad faith. (Id. at 183.) He also reiterated that 15 MFMI already had two surgeon reports confirming Barton needed surgery 16 because of the accident but MFMI could not point to any evidence that the March 17 2019 accident and the surgeries were related. (Id.) That same day, Barton also 18 sent a letter requesting MFMI specify any healthcare providers from which it 19 sought records. (Id. at 181.) On March 29, 2021, Barton disputed the need for 20 such extensive records because he had already provided medical information 21 showing that he did not suffer from lower back issues in the years prior to the 22 March 2019 crash and demanded a copy of all reports from every review of the 23 medical records to date. (Id. at 177.) On April 2, 2021, MFMI replied that it had 24 only become aware of Barton’s 2001 accident after reviewing the medical record 25 and asserted that the record indicated Barton suffered from chronic lumbar pain 26 since the 2001 accident and thus it needed the additionally requested records to 27 evaluate his claim. (Id. at 189-192.) In its deposition, MFMI admitted that, by 28 July 12, 2021, it could not determine whether Barton had even one dollar of 2 point it had never engaged with any medical experts to analyze the accuracy of 3 the projected future medical expenses or had found any records indicating that 4 Barton’s current issues were related to the 2001 accident. (Id. at 14, 16, 19-20.) 5 In March 2021, Barton demanded payment from Safeco, which promptly 6 responded. Barton first sent a letter to Safeco on March 23, 2021. (Id. at 194.) 7 Safeco acknowledged receipt the following day and followed up on March 26, 8 2021, to identify the claim professional handling the case. (Id. at 196, 200.) By 9 April 1, 2021, Safeco requested Barton provide an interview and statement, 10 declaration pages, estimates of damages, the police report, and a copy of the 11 demand letter sent to MFMI. (Id. at 202-210.) On April 19, 2021, Barton sent 12 Safeco a UIM benefit policy limit demand letter which indicated that Barton’s past 13 medical expenses totaled $423,254.11 and that his projected future medical 14 expenses were $1,126,476. (Id. at 64-71.) On May 4, 2021, Safeco sent Barton a 15 reservation of rights explaining that Safeco was an excess insurer because Barton 16 was driving a vehicle he did now own and that Safeco had no payment obligation 17 because Barton could only recover the highest applicable limit, which was the 18 MFMI policy. (Id. at 211-213.) That same day, Safeco requested Barton give it an 19 extension to review the MFMI policies because it had just received the MFMI 20 adjuster’s contact information. (Id. at 215.) Safeco also requested five years of 21 medical history. (Id.) On May 6, 2021, Safeco reached out to MFMI to request the 22 declarations page of its policy or written confirmation of the UIM benefits. (Id. at 23 218.) The internal email chain showed that on March 30, 2021, the assigned 24 claim professional at MFMI still had not received or reviewed the policy’s UIM 25 language. (Id. at 222.) On May 18, 2021, Safeco requested MFMI confirm it was 26 the primary insurer for UIM benefits and that Safeco was an excess insurer; that 27 same day, MFMI replied that it was the primary insurer. (Id. at 5-11.) 28 2 and MFMI. (Id. at 73-74.) He accused the insurance companies of serious delay, 3 wrongfully denying payment, and failing to cooperate and threatened to bring 4 litigation alleging breach of contract and bad faith denial of benefits. (Id.) On June 5 11, 2021, Safeco requested MFMI provide all communications between Barton 6 and MFMI and asserted that MFMI was responsible for paying the entirety of its 7 UIM benefits or Safeco would seek recovery for any payment it was forced to 8 make. (Id. at 228-231.) On June 11, 2021, Safeco paid its policy limit of $250,000 9 and in November 2021, MFMI paid $750,000 to Barton. (ECF Nos. 1 at 4-5; 9 at 10 78.) 11 II. LEGAL STANDARD 12 “The purpose of summary judgment is to avoid unnecessary trials when there 13 is no dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t 14 of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate 15 when the pleadings, the discovery and disclosure materials on file, and any 16 affidavits “show there is no genuine issue as to any material fact and that the 17 movant is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 18 U.S. 317, 322 (1986). An issue is “genuine” if there is a sufficient evidentiary 19 basis on which a reasonable fact-finder could find for the nonmoving party and 20 a dispute is “material” if it could affect the outcome of the suit under the 21 governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The 22 court must view the facts in the light most favorable to the non-moving party and 23 give it the benefit of all reasonable inferences to be drawn from those facts. 24 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 25 The party seeking summary judgment bears the initial burden of informing 26 the court of the basis for its motion and identifying those portions of the record 27 that demonstrate the absence of a genuine issue of material fact. Celotex, 477 28 U.S. at 323. Once the moving party satisfies Rule 56’s requirements, the burden 2 genuine issue for trial.” Anderson, 477 U.S. at 256. The nonmoving party “may 3 not rely on denials in the pleadings but must produce specific evidence, through 4 affidavits or admissible discovery material, to show that the dispute exists[.]” 5 Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991). 6 III. DISCUSSION 7 A. Priority of Insurers 8 The parties dispute whether Safeco had an independent duty to pay UIM 9 benefits to Barton, or if MFMI was fully responsible for paying Barton based on 10 the companies’ “other insurance” clauses. The Court finds that 1) the “other 11 insurance” clauses do not conflict, as each capped Barton’s recovery to the 12 highest applicable limit and 2) Safeco was an excess insurer based on its “other 13 insurance” clause. As a result, Barton was entitled to recover $1 million (MFMI’s 14 policy limit, which was the higher policy limit), and MFMI was responsible for 15 paying the entire benefits, not a pro-rata amount. 16 a. “Other Insurance” Clauses 17 As an initial matter, parties do not dispute that both companies’ “other 18 insurance” clauses cap the insured’s potential recovery to the greater of the two 19 policy limits. The Safeco policy states that “[i]f there is other applicable insurance 20 available…[a]ny recovery for damage under all such policies or provisions of 21 coverage may equal but not exceed the highest applicable limit for any one vehicle 22 under any insurance providing coverage on either a primary or excess basis.” 23 (ECF No. 15 at 124.) Similarly, MFMI’s “other insurance” clause says that “[t]he 24 maximum recovery under all coverage forms or policies combined may equal but 25 not exceed the highest applicable limits for any one vehicle under any coverage 26 forms or policy providing coverage on either a primary or excess basis.” (Id. at 27 86.) Thus, Barton was clearly entitled to recover the greater of the two policies. 28 Here, Safeco’s policy limit was $250,000; MFMI’s limit was $1 million. (ECF Nos. 2 up to $1 million. 3 b. Primary and Excess Insurance 4 While the parties agree that the “other insurance” clauses cap Barton’s 5 total recovery to $1 million, they disagree about whether Safeco’s “other 6 insurance” clause makes it an excess insurer. Safeco’s “other insurance” clause 7 includes a provision stating that “[a]ny insurance we provide with respect to a 8 vehicle you do not own, shall be excess over any collectible insurance.” (ECF No. 9 15 at 124.) Because the parties do not dispute that Barton was driving a truck 10 owned by TPM Services, Inc. and insured by MFMI (ECF No. 9 at 3, 29), Safeco 11 asserts that MFMI had the primary payment obligation and it “only had a 12 potential contingent, excess payment obligation[.]” (ECF No. 14 at 3.) MFMI 13 responds that Safeco was not a “true” excess insurer because it issued a primary 14 insurance policy with an “other insurance" clause, so Safeco still owed Barton a 15 primary obligation to satisfy Barton’s UIM claims along with MFMI as co-insurers. 16 (Id. at 11-14.) MFMI testified that it reduced its payment to Barton from $1 million 17 to $750,000 based on the “other insurance” clauses capping Barton’s total 18 recovery to $1 million and the fact that Safeco had already paid $250,000. (ECF 19 No. 15 at 13.) 20 Safeco’s policy was excess to the MFMI policy. While MFMI argues that 21 Safeco is not a true excess insurer and that Safeco provided a “coincidental” 22 excess policy (a primary policy also operating as excess because of its “other 23 insurance” clause), this distinction is neither relevant nor convincing. The only 24 binding precedent that MFMI cites in support of this distinction is AMHS Ins. Co. 25 v. Mut. Ins. Co., 258 F.3d 1090 (9th Cir. 2001), which considered whether a policy 26 is a “true” excess carrier under Arizona law. AMHS Ins. Co. addressed a different 27 situation in which the primary insurer was clear and the issue was the relative 28 positions of two different insurance policies, both of which included “other 2 Here, by contrast, MFMI’s policy also clearly provides that it is an excess insurer 3 if the insured did not own the vehicle. (ECF No. 15 at 86.)(“Any insurance we 4 provide with respect to a vehicle the Named Insured does not own shall be excess 5 over any other collectible uninsured motorists insurance providing coverage on a 6 primary basis.”) That “excess” provision did not apply because it is undisputed 7 that MFMI’s insured, TPM Services, Inc., owned the car Barton drove. (ECF No. 8 9 at 3, 29.) Thus, MFMI provided primary coverage with no relevant excess 9 coverage provision and Safeco’s “other insurance” clause made it an excess 10 insurer to MFMI. 11 c. Lamb-Weston Rule 12 MFMI argues that the policies’ “other insurance” clauses are mutually 13 repugnant, necessitating the Court to apply the Lamb-Weston rule and find the 14 insurance obligations should be pro-rated according to the policies’ limits. In 15 Travelers Insurance Co. v. Lopez, 567 P.2d 471, 474 (Nev. 1977), the Nevada 16 Supreme Court adopted the Lamb-Weston rule, originating in the Oregon 17 Supreme Court case Lamb-Weston, Inc. v. Oregon Auto. Ins. Co., 341 P.2d 110 18 (1959), which holds that “the ‘other insurance’ clause contained in one policy of 19 insurance [is] null and void when it conflicts with a similar clause contained in 20 another policy of insurance.” Travelers Ins. Co., 567 P.2d at 474. In Alamo Rent- 21 A-Car v. State Farm Mut. Auto. Ins. Co., 953 P.2d 1074 (Nev. 1998), the Nevada 22 Supreme Court clarified that, under the Lamb-Weston rule, “[m]utually 23 repugnant escape, excess, or pro-rata clauses [are] disregarded and losses [are] 24 pro-rated according to the limits of both policies.” Alamo Rent-A-Car v. State Farm 25 Mut. Auto. Ins. Co., 953 P.2d 1074, 1076 (Nev. 1998). 26 The Court finds that the Lamb-Weston rule does not apply in the given case 27 because the policies do not conflict. MFMI asserts that the policies conflict 28 because the MFMI policy states that “[o]n a primary basis, we will pay only our 2 primary basis.” (ECF No. 15 at 86.) The policy declares that “[o]ur share is the 3 proportion that our limit of liability bears to the total of all applicable limits of 4 liability for coverage on a primary basis.” (Id.) However, this does not conflict with 5 Safeco’s other insurance clause because Safeco’s policy states that when the 6 insured is not driving a vehicle they own, then Safeco is an excess insurer (ECF 7 No. 15 at 124), and the cited MFMI policy provision only requires pro-rata 8 payments amongst primary insurers. 9 MFMI’s citation to Ninth Circuit caselaw, Port of Portland v. Water Quality 10 Ins. Syndicate, 796 F.2d 1188 (9th Cir. 1986), is unhelpful. In Port of Portland, 11 the court, applying Oregon law, upheld the district court’s application of the 12 Lamb-Weston rule when one insurer had a provision making it an excess insurer 13 to other insurance, which in that case included a provision requiring co-existing 14 insurers to pay their pro-rated share of the insured’s benefits. Port of Portland, 15 796 F.2d at 1193. That case is distinguishable in a number of ways, but most 16 importantly because Safeco’s policy is excess if the insured does not own the 17 vehicle, a provision that MFMI includes in its own policy. As a result, the Court 18 will not apply the Lamb-Weston rule. 19 B. Equitable Indemnification 20 Having found that the insurance policies do not conflict and that MFMI was 21 a primary insurer while Safeco was an excess insurer, the Court must now 22 consider whether Safeco is entitled to its requested relief of equitable 23 indemnification. 24 “[E]quitable indemnity is a judicially-created construct to avoid unjust 25 enrichment." Medallion Dev. v. Converse Consultants, 930 P.2d 115, 119 (Nev. 26 1997), superseded by statute on other grounds as stated in Doctors Co. v. Vincent, 27 98 P.3d 681, 688 (Nev. 2004). Equitable indemnification "has been developed by 28 the courts to address the unfairness which results when one party, who has 2 by another party." Rodriguez v. Primadonna Co., LLC, 216 P.3d 793, 801 (Nev. 3 2009). “A claimant seeking equitable indemnity must plead and prove that: (1) it 4 has discharged a legal obligation owed to a third party; (2) the party from whom 5 it seeks liability also was liable to the third party; and (3) as between the claimant 6 and the party from whom it seeks indemnity, the obligation ought to be 7 discharged by the latter.” Id. In addition, Nevada law requires “some nexus or 8 relationship between the indemnitee and indemnitor.” Id. at 802 (citing Piedmont 9 Equip. Co. v. Eberhard Mfg., 665 P.2d 256, 258 (Nev. 1983)). 10 Safeco has established that it is entitled to equitable indemnification. First, 11 Safeco discharged a legal obligation owed to a third party. Here, Safeco paid 12 $250,000 to Barton which MFMI was obligated to pay as part of its UIM coverage. 13 MFMI argues that Safeco had an independent duty to Barton, so its payment only 14 relieved its own legal obligation. (ECF No. 16 at 16.) However, as previously 15 discussed, because MFMI was the primary insurer, it was responsible for paying 16 up to its policy limit, which was $ 1 million. It was not entitled to reduce its UIM 17 benefits by $250,000 because Safeco paid first to avoid a lawsuit. Safeco meets 18 the second criteria because neither party disputes that MFMI was also liable to 19 Barton. Safeco also meets the third criteria because, as a matter of equity, MFMI 20 should have paid the $250,000 since it was the primary insurer and Safeco was 21 only an excess carrier per the terms of its policy. 22 MFMI’s actions in response to Barton’s request for benefits further justifies 23 equitable indemnification. Barton first requested payment from MFMI in April 24 2019. (ECF No. 15 at 62.) By July of 2021, MFMI still was unable to determine 25 whether Barton had incurred any damages despite Barton having undergone two 26 lumbar spine fusion reconstruction surgeries and MedTrak projecting Barton’s 27 future care to cost $1,036,776, already more than MFMI’s policy limit. (Id. at 14- 28 17.) MFMI claims that it needed additional information from Barton to evaluate 2 or consultants to analyze the accuracy of the MedTrak projection nor could it 3 identify any information that disputed the Medtrak projection. (Id. at 17.) While 4 MFMI suggests that Barton’s complaints may have been tied to a prior accident, 5 it fails to cite to any medical records to support this theory. (Id. at 25.) Despite 6 having three years of Barton’s medical records which did not indicate ongoing 7 conditions from his prior 2001 accident and having not engaged with any expert, 8 on March 22, 2021, MFMI requested twenty years of medical records. (Id. at 175.) 9 In contrast, Barton first demanded payment from Safeco on or about March 23, 10 2021, and Safeco ultimately paid its policy limit of $250,000 before MFMI had 11 completed its evaluation of Barton’s claim. (ECF No. 1 at 4-5, 15 at 194.) Thus, 12 Safeco’s prompt resolution of Barton’s claims provides further support for finding 13 MFMI should indemnify Safeco. 14 The Court further finds that Safeco and MFMI had a sufficient relationship 15 to permit equitable relief. The Nevada Supreme Court has recognized the 16 availability of equitable subrogation and similar relief. See AT & T Technologies, 17 Inc. v. Reid, 855 P.2d 533, 535 (Nev. 1993). “Generally, subrogation is an 18 equitable doctrine created to ‘accomplish what is just and fair as between the 19 parties.’ It arises when one party has been compelled to satisfy an obligation that 20 is ultimately determined to be the obligation of another.” Id. (internal citations 21 omitted). In Nevada, “equitable subrogation is available as a claim for equitable 22 relief where contractual subrogation is unavailable, and where not precluded by 23 a statutory scheme.” Colony Ins. Co. v. Colorado Cas. Ins., No. 2:12-cv-01727- 24 RFB-NJK, 2018 WL 3312965, at *5 (D. Nev. July 5, 2018). In Colony, the district 25 court, following a bench trial, granted judgment in favor of a plaintiff excess 26 insurer against a primary insurer carrier to recover costs incurred as a result of 27 the primary insurer’s delay in settling and refusal to do any substantive 28 investigation. Id. at *5-7. In Colony, the excess insurer was forced to pay the 1 || insured due to the primary insurer’s conduct. Because Safeco was an excess 2 || insurer similarly forced to make a payment due to MFMI’s (the primary insurer’s) 3 || conduct, Safeco is also entitled to equitable relief. 4 MFMI’s attempts to distinguish this case from Colony are unpersuasive. 5 || MFMI argues that Safeco cannot rely on Colony because that case involved a 6 || “true” excess carrier. (ECF No. 16 at 13.) The Court has already rejected this 7 || proposition because Safeco was clearly excess to MFMI and that MFMI was 8 || responsible for paying its full policy limit of $ 1 million. Thus, Colony, though not 9 || binding, is applicable and the Court will grant Plaintiffs Motion for Summary 10 || Judgment. 11 Cc. Equitable Subrogation 12 Since the Court has already found that Safeco is entitled to equitable 13 || indemnification, it will not discuss its alternative requested form of relief of 14 || equitable subrogation. 15 || IV. CONCLUSION 16 It is therefore ordered that Defendant’s Motion for Summary Judgment 17 || (ECF No. 9) is denied. 18 It is further ordered that Plaintiff's Motion for Summary Judgment (ECF 19 || No. 14) is granted. 20 It is further ordered that the Clerk of Court is directed to enter judgment 21 || accordingly and close this case. 22 23 24 DATED THIS 2224 Day of March 2024. 25 26 Aras plod jd 27 ANNE TRAUM =—C □□□□ UNITED STATES DISTRICT JUDGE 28 12